Starbucks posts record revenue as China booms

STARBUCKS reported record revenue in its fiscal third quarter as its China business roared back to life.

Still, the company’s results were mixed for the 13 weeks ending July 2. While its earnings surpassed Wall Street’s forecast, its revenue and same-store sales were lower than expected as North American store traffic slowed.

Starbucks shares were down 1 percent in after-market trading on Tuesday.

Same-store sales — or sales at stores open at least a year — jumped 46 percent in China, reversing last year’s declines due to Covid restrictions. At Chinese stores opened in 2019 or earlier, morning routines are fully back to 2019 levels, the company said.

Starbucks CEO Laxman Narasimhan, who spent part of the quarter visiting stores in China, noted that the company now has a record 20 million active Starbucks Rewards users in the country. And he said he’s convinced there’s a long runway ahead.

Narasimhan noted that Chinese consumers drink an average of 12 cups of coffee per year; US customers drink 380.

“We are still in our early days in China,” Narasimhan said during a conference call with investors.

But North American same-store sales growth slowed to 7 percent after three quarters of double-digit gains. Customers paid more for their drinks and food, and revenue rose 11 percent to a record $6.7 billion for the region. But customer traffic was up just 1 percent.

Narasimhan said new equipment, including warming ovens and cold foam blenders, have now rolled out to all US company-operated stores and are improving service times. Cold drinks now make up 75 percent of Starbucks’ US beverage sales, he said, and cold foam is the fastest-growing add-on.

The Seattle-based coffee giant said its overall revenue rose 12 percent to $9.2 billion in the quarter. Analysts had expected revenue of $9.3 billion, according to FactSet.

Starbucks’ global same-store sales increase of 10 percent was also lower than Wall Street’s forecast of 11 percent.

The company’s net income rose 25 percent to $1.1 billion, or 99 cents per share. Excluding restructuring costs, the company earned $1 per share. That was higher than the 95 cents analysts forecast.

Starbucks Chief Financial Officer Rachel Ruggeri said the company now expects its full-year earnings to grow 16 percent to 17 percent this year. The company had previously forecast growth of 15 percent to 20 percent.